Understanding Demand in a Recurring Revenue Business: Part 1 of 3

Posted by: Matt Shanahan

Everything is a service more and more. And no surprise, this new “everything as a service” approach (XaaS) allows organizations to effectively add value to commoditized products where the costs of goods approach zero. The service “wrapper” becomes the new differentiating factor; the demise of the “discrete” product gives rise to the subscription-based business model. This fundamental transition from products to services fuels another change as well—the way we measure demand.

Not long ago understanding demand was as simple as tracking orders. A single product was offered, customers acted as a single market, and demand was understood solely through the analysis of purchase data. The product world worked like the sleepy magazine company who upon customer order delivered twelve standard magazines to a doorstep over a one year period. Was the product read cover-to-cover or tossed in the garbage? Read by four people or one? Taken on vacation or used for work? No one knew. The answers to these questions were unknowable. Usage data simply wasn’t a factor.

In today’s self-serve, always-available world demand metrics derived from usage data are the “secret sauce” of an organization—an absolute minimum requirement for a competitive advantage. So what happened? What drove this dramatic move to the top of the list? That is the topic of the next posting.